Japan mulls cautious response to Russian invasion of Ukraine
The upper house secretary-general of Japan's ruling Liberal Democratic Party (LDP) has warned that any decisions to scale back Russian energy ties must avoid too great an impact on Japanese energy consumers, Reuters reported on March 6.
LDP's Hiroshige Seko told public broadcaster NHK that Tokyo would consider further Russian penalties but needed to secure the public's "understanding" given the implications for energy security.
"Sanctions could have a big impact on [Japanese] people's livelihoods, so we would have to seek their understanding for the sake of solidarity with Ukraine," Seko said. "If we exit from Sakhalin-1 and 2 projects, [oil and natural gas] supply would be disrupted while countries like China who are desperate for LNG would get it cheaply. We must consider it realistically."
Moscow is looking to expand ties with China to diversify its gas exports, the majority of which currently go to Europe. In February, Gazprom signed a preliminary agreement with China's CNPC to expand imports from the Far East by 10bn m3 annually. Beijing has refused to condemn Russian actions in Ukraine, though it has said it supports Ukrainian sovereignty and could play a role in mediating peace talks.
Japan is involved in Russia's Sakhalin-1 oil and gas project and Sakhalin-2 LNG facility. Both are set to see investments tail off after Western majors ExxonMobil and Shell announced recently they would be leaving. Sources told S&P Global on March 1 that the Shell and ExxonMobil announcements came as a "shock" for Japan's energy sector.
Mitsui and Mitsubishi own 12.5% and 10% stakes in the 9.6mn metric tons/year Sakhalin-2 facility, which has booked half of capacity for Japanese customers. Japanese consortium SODECO, in which Japan's ministry of economy and trade has 50% interest, owns a 30% share in Sakhalin-1 oil and gas fields. SODECO has said it is looking at the implications of ExxonMobil's decision to withdraw.